Research

Working papers

Voting Rationales

 (with Roni Michaely and Irene Yi)

We examine why institutional investors vote the way they vote on director elections, using a novel dataset on voting rationales provided by institutional investors.  We find that the most important reasons for opposing directors are board independence, board diversity, tenure, firm governance, and busyness; institutional investors are also increasingly voting against directors to hold them accountable for failure to address environmental and social issues. We find that institutional investors' concerns are well-grounded: companies with low board gender diversity receive more rationales on board diversity, similar for companies with long director tenure and busy directors. This is consistent with institutional investors devoting significant effort toward governance research.  Finally, companies with high dissent voting related to board diversity, tenure, and busyness improve their board composition in the following year. Our results suggest that directors are willing to address concerns that result in high shareholder dissent, and voting rationales can be an effective tool to communicate the source of dissent.

Media coverage: Harvard Law School Forum on Corporate Governance - The Island

Regulatory capital management to exceed thresholds

(with Luciana Orozco)

We investigate whether bank capital regulations can create incentives for banks to hold capital above minimum requirements. We exploit the Federal Deposit Insurance Corporation Improvement Act of 1991, which introduced a 10% capitalization threshold to separate well-capitalized from adequately capitalized banks, with the former receiving regulatory incentives. We document a statistically significant discontinuity around the 10% threshold, suggesting that these incentives matter for banks. We find that banks manage regulatory capital to exceed this threshold and thus pay lower deposit insurance fees and to access brokered deposits and financial activities. To reach this threshold, banks often rely on equity sales and transfers from parent institutions, while accounting discretion is used mostly when the capital shortfall is relatively small. This finding suggests that regulations that offer incentives can be effective at increasing banks' capital position. We find some evidence that capital management hurts bank stability but only when banks use their accounting discretion to exceed the threshold.

Conditionally accepted at Journal of Money, Credit and Banking

The bright side of stock repurchases 

(Job Market Paper)

I provide evidence of actual stock repurchases increasing future investment in firms subject to strong asymmetric information that are reliant on external capital markets. To address endogeneity, I use an instrumental variables approach based on price pressures created by mutual funds' liquidity needs. The results are consistent with firms using actual repurchases to signal their type, which eases access to capital markets and ultimately improves real outcomes. 

Media coverage: WSJ Moneybeat - Clearbridge

Do institutional investors care about corporate social responsibility and irresponsibility?* 

 (with Antonio B. Vazquez)

This paper investigates how Corporate Social Responsibility (CSR) and Corporate Social Irresponsibility (CSiR) change when the degree of monitoring by institutional investors varies. We exploit changes in institutional investor distraction due to extreme events in unrelated industries, which is a plausible exogenous source of variation in monitoring intensity. We show that tighter monitoring reduces both CSR and CSiR. The impact on the former is mainly found in contexts prone to agency conflicts, while the effect on the latter is concentrated in settings where there is a demand for advising. Our results are robust to alternative definitions of monitoring intensity and CSR.

*Available upon request